"The law works on the basis of freedom of contract and caveat emptor, so, in these cases, unless there has been misrepresentation or unless it can be shown that the banks have taken on a special duty of care because of a fiduciary relationship (which most bank documents expressly exclude) the buyer is supposed to know what he is buying and the risks thereof."
MY VIEW:
Clearly, the relationship manager did mis-represent the product that they sold to the investors, who were generally risk averse. The question is, "did the RM understand the product?" Most likely, they did not. If this were the case, surely, they must have mis-represented the product?
The strategy for the investor is to provide clear proof that there was mis-representation. This can be in a sworn statement. Better still, it should be supported by an impartial witness or written documentation.
fiduciary relationship? Based on a commmon sense approach, the average person should know very well that the bank officer is merely a salesperson. There is no fiduciary relationship.
ReplyDeleteDoes that means the RMs can go all out to "cheat" investors as long as they do not leave any hard evidence?
ReplyDeleteThe RMs have a fiduciary duty to the client and MUST conduct due diligence on the product to assess the suitability to the clients after conducting a fact find and need analysis of the clients' financial circumstance and needs. Without conducting these activities there is no way to establish whether the product meets the needs the needs of the clients. The lawyer is wrong to say that the 'sale" was on an caveat emptor basis. Caveat emptor is transaction WITHOUT ADVICE.
ReplyDeleteEven it was the client who initiated or appoach the RMs the RMs are still required to conduct due diligence. The minibond saga it was the banks or the RMs who prospected the clients and it was the duty of the RMs to find out whether the product was suitable after fact finding and considering the circumstances and the needs of the clients.
The RMS did nothing of that. It was sale of a product pushed to the clients.
The Watchman
But how to explain that in HK, the securities firm hv to pay very high percentage, or even 100%.
ReplyDeleteIn Sg, it is the reverse.
Is the law in SG & HK different?
Anon 9.36 PM
ReplyDeleteThe laws in SG and HK are not much different. They are based on the British model as both were once British colonies.
The difference is in the gahmen and the people, that's why the percentage payout also different.
If one inititate the contact to consult a lawyer, does the latter have fiduciary duty to find out facts and needs of the former, or is it just another case of caveat emptor? "Caveat emptor" the no-(ir-)resposibility clause.
ReplyDeleteA friend in need is a friend in deed. Our "leaders" in white show their true colours when ordinary citizens are in need. Caveat emptor...
It appears to be incorrect to put most of the blame squarely on the RMs when in fact the mastermind criminals are all way up the chain. Be fair to the RM, how is he or she expected to understand all these complicated stuffs pushed down from the schemers up the chain? Let me give an example of a TV salesman. We do not expect or require the TV salesman to understand how the TV works in detail. He is required only to inform the customer the basics, "you do this you do that and you get this and you get that. You don't do this and you don't do that and all is well". In my view, as long as the RM didnt say "dont worry if one bank fail other banks will back up the product u cant lose" then the RM ought not to be bearing so much responsibility as compared to the scoundrels who perpetuated the scam.
ReplyDeleteNow back to the example, if a customer bought the TV and gets electrocuted somehow when he switched on the TV, it is not fair to go after the salesman. One should go after the designer of the scheme. The RM is subservient to the schemers up there who like all smart people do, run away or disappear or point finger at the slightest trouble. So it is a very complicated matter.
REX
Hi Rex
ReplyDeleteI agree that the RM should not shoulder the full blame.
But, if they are honest, they can admit that they were also mis-informed by the product issuer, so that conveyed the wrong message to the retail customer.
It is not a crime to make an honest mistake. But it is wrong for the RM to lie now and hide the mistake.
I hope that many RMs will come forward, in the interest of honesty, fairness and justice.
I was told some FIs make the RMs paid for their mistakes. So who dare to be honest ? Our Gahmen who has brought in these toxic products are partly to be blamed. Now they simply push all of us to FIdrec. How could Fidrec help ? We will finally be exhausted and give up .... GOOD STRATEGIES indeed, S'pore !
ReplyDeleteYes, Mr Tan, the FIs/banks/RMs should have their share of responsibility & blame in this saga. But apparently, the investors are the ones bearing all the losses.
ReplyDeleteIt will be really fair for FIs & banks to offer some compensations to ALL investors affected.
starlight
In our society the powerful schemers up there controls everything down below. Thus the retail customer who is at the bottom of the chain gets bullied the most. The next bottom rung is the RM or FA. I believe they are also being bullied by the schemers higher up. The RM/FA are probably forced by the higher powers to shift the blame to the client otherwise they will have to bear the full losses themselves.
ReplyDeleteAnd the chain goes all the way up to the old thing that says you go in with eyes open.
hi Mr Tan
ReplyDeletePersonally, I think that the RM could well be decieved by the higher up chain. There are all sorts of different RMs some are more innocent then others. As i said they are just like TV salesman salaried man. If the salesman knew that a certain TV can cause electrocution, if he is honest he will resign and stop selling or challenge his bosses. But i think many don;t even know they are selling such a dangerous product because CDOs swap is so complex. The real crooks are the schemers up the chain,,
You can't catch the schemers at all unless the government is involved. Even Ernie webber the one that caused the Worldcom collapse, the US govt cant do much with him so how do u catch the culprits. You can only resort to ex gratia pleas for mercy from the banks to compensate but it is very difficult to make them admit liability.
So i said, it is not feasible to chase after the poor tv salesman. We need a very strong government and brave and just lawyers. If the government dont care, and have the attitude that it is an investors problem.. yes it becomes the investors problem.. unsolvable. So sad.
REX
The RMs MUST conduct due diligence on the products that they are selling. If they think that the products are not suitable they MUST not recommend. If the RMs claim that they didn't know the products they breach the "fit and proper" requirement of the FAA.
ReplyDeleteIf they didn't conduct the fact finding they also breach section 27 of the FAA. These 2 laws are to ensure that the job is to be carried out properly, to ensure the interest of the clients is upheld and protect the clients.Because they were not done the investors were led into investing in the products , unfortunately became toxic.
I have heard there were RMs and inusrance agents who refused to sell products that they think are scam and rip off or toxic or will not benefit their clients. These are the honest and the competent ones who have the interest of their clients at heart and not those salesmen who die die must sell to earn the commission. These salesmen are greedy and dishonest.
Whatever the RMs or salesmen the FIs are accountable and liable for any misconduct by them . Suing the FIs one can prove that one was misled , cheated, misrepresented or msi-sold by the RMs and this is good enough to convict the FIs.
Both FIs and RMs are liable severally or jointly.
Its about time that RMs turn Whistle Blowers and come out to tell the real story about how the management of the FIs and banks are incompetent and the real culprits.
ReplyDeleteMAS can then go after the FIs and banks and impose hefty fines and suspent their licences.